Symrise Earnings: One-Off Hit To Profit Sends Shares Lower and Makes for Attractive Entry Point

Wide-moat Symrise SY1 reported first-half 2023 EBITDA of EUR 446 million, below our forecast of EUR 484 million and Vara consensus of EUR 479 million. This was primarily due to a one-off hit of EUR 29 million recorded in the scent and care segment, related to a temporary shutdown of its Colonel Island production plant, a business reorganization, and the costs associated with antitrust procedures that were initiated in March by the European Commission. Otherwise, the 8.0% organic growth for the first half was broadly in line with our forecast and the consensus (8.1% in our forecast and 8.6% for consensus), primarily driven by pricing actions. Management reconfirmed the 2023 full-year guidance of organic sales growth at between 5% and 7% and a normalized EBITDA margin (excluding one-offs) of around 20%, which is aligned with our forecast. We don’t expect the one-off impact to be too material to our valuation and maintain our EUR 108 fair value estimate. The share price was down around 2%-3% in early trading, resulting in upside of around 14% to our fair value estimate.

As expected, sales growth slowed down in the second quarter compared with the first quarter across both reporting segments. However, the taste, nutrition, and health segment continued to display a resilient performance (8.3% organic growth in the second quarter compared with 14% in the first quarter), driven by strong pricing in both pet care and food and beverage. The growth in the scent and care segment was muted (0.8% organic growth in the second quarter compared with 4.3% in the first quarter). This was primarily due to a significant volume decline in aroma molecules—the subsegment most affected by customers’ inventory management. Overall, destocking (especially in North America) was a common theme across the results of all consumer ingredients players that have reported results so far.